Summer’s almost here, and many students will be hunting for a student job. It's not only the student in question doing the searching; student jobs raise a few questions for parents too.
1. Is the student still dependent on his/her parents?
For a student to be dependent on the parents, so that they can benefit from the tax rebate for dependent children, the following conditions must be met.
a) The student must be part of the family on 1 January of the year following the income year
So for the 2016 income year, the tax authorities will consider whether the student was part of the family on 1 January 2017.
Note: If the student has temporarily left the family home to pursue his/her studies (e.g. the student lives in a dorm or flat during the week), the student is generally still considered to be part of the family.
b) The student does not receive wages which are a business expense for the parents
For example, suppose the student helps her parents in their bakery during the holidays. The wages the student receives are a business expense for the parents, so the student is not considered to be a dependent.
But if the student is employed by her parents via a company which operates the bakery, she is still a dependent. Since the parents and the company are separate taxpayers, the student remains a dependent. It is the company that deducts the wages as a business expense.
c) The net livelihoods may not exceed a certain amount
That amount varies according to whether the parents are taxed jointly or individually.
Note: These amounts are different for students working under ordinary employment agreements than for those with student agreements.
"Livelihoods" means all regular, occasional or casual income, such as wages, unemployment benefits, sickness and disability insurance payments and living allowances. For students who are adults or emancipated minors, this also includes income from any real property they may own and earnings from capital.
Note: On the other hand, for persons who may be dependents, the following are not deemed to be part of their "livelihood":
- The first tranche of 2,610 euros (2016 income) from allowances received by students in accordance with a student employment agreement;
A student employment agreement is a written employment agreement under which no more than 50 days are worked in total in a calendar year. No social security contribution is payable on the wages and no tax needs to be paid.
In 2016, a student receives a gross wage of €5000 (after deduction of the social security contribution or solidarity contribution) in the context of an agreement for student employment. Only the portion that exceeds €2,610, i.e. €2,390, will be counted as "livelihood". After deduction of the flat-rate costs (€2,390 x 20% = €478), the net sum amounts to €1,912. (= still a dependent)
- Living allowances that are granted or increased under a court decision with retroactive effect and that are paid after the year to which they relate;
- The first tranche of €3,140 (2016 income) of the received living allowances granted to the children;
In 2016, the student receives a gross living allowance of €6,000. Only the portion that exceeds €3,140, i.e. €2,860, will be counted as "livelihood". After deduction of the flat-rate costs (€2,860 x 20% = €572), the net sum amounts to €2,288.
- Statutory family allowances, maternity benefits and adoption bonuses;
- Premarital savings bonuses;
The amounts in question are always net amounts. This means that a number of costs are deducted from the student’s livelihood, regardless of the nature of the income:
- Either the actual substantiated costs that you can prove with supporting documents;
- Or a flat-rate amount of 20%, with a minimum of €440 (2016 income), for the remuneration and benefits of liberal professionals or other types of gainful employment.
2. As a parent, can you still receive a family allowance if your child studies and has a student job?
If the child is aged between 18 and 25, you are still entitled to a family allowance while they study if you meet the conditions set out above.
3. Can a student be self-employed?
Some students prefer to be self-employed than to work for someone else. In such a situation, the following points should be taken into account:
- To be able to work as a self-employed person, the student should in principle be an adult, i.e. 18 years old or over. To work as a craftsman (performing a service without supplying goods), the required minimum age is 16. However, permission from the parents or guardian is required.
- Before embarking on self-employment, you should contact a recognised enterprise counter (business consultancy - ondernemingsloket). A commercial or craft business must provide evidence of entrepreneurial skills (basic management knowledge and sector or cross-sector competencies) in order to obtain registration. The enterprise counter will check that the business meets these conditions.
- After taking advice from the enterprise counter, the next step is to contact the competent VAT audit service to check whether the activities are subject to VAT.
- Students who work as self-employed persons must register with a social insurance fund for independent workers of their choice by no later than the day on which they start working, or register with the National Social Insurance Fund for Self-Employed Persons (Nationale Hulpkas voor Sociale Verzekeringen der Zelfstandigen). They must pay quarterly social security contributions amounting to 22% of their income (subject to exceptions).
- Self-employed persons are also required to open a current account with a bank. This account must be separate from their private account and be used for transactions connected with their self-employed activities.
- Self-employed persons are also subject to accounting requirements. These differ depending on the size of the business.
Students working as sole traders retain the family allowance provided they don’t work for more than 240 hours per quarter.
If the above formalities make embarking on self-employment seem less attractive, students also have the option of working as an assistant for another self-employed person. This means they assist or stand in for the self-employed person in the performance of their business activities, without being bound to them by an employment agreement. In principle, the assistant need not provide evidence of entrepreneurial skills as mentioned above, nor be registered with the Central Enterprise Databank (Kruispuntbank voor Ondernemingen). And if the assistant is younger than 20, he or she is not required to register with or contribute to a social insurance fund for independent workers. Incidentally, there’s nothing to prevent a student from being an assistant to their self-employed parents (or to just one of them). However, in this case the student can no longer be considered to be a dependent of his/her parents for tax purposes.
4. Personal income tax return
If you work as a student, you have to file a tax return for your personal income. In that return, you must list all of your taxable income, i.e. including the portion of the living allowances and other allowances which are not considered to be part of your "livelihood", and which are not counted when determining whether a student is a dependent of his/her parents.
The personal income tax return can be completed via Tax-on-web. If the student wishes to file a paper return, the appropriate form must be requested from the tax office.
In many cases, it’s advantageous for a student to file a personal income tax return. If the earnings fall under the tax-free threshold, the student will receive the deducted payroll tax amounts as a refund.
Author: Tanja De Naeyer